ALLANDALE SPORTSLINE INC. v.

THE GOOD DEVELOPMENT CORP

CONSIGNATION

Allandale Sportsline Inc (ASI) obtained a loan of P204,000 from The Good Development
Corp (GDC) under a Promissory Note signed by Melbarose Sasot (Pres) and
Allandale Sasot (VP) of ASI, with Theresa Manipon, as one of the three co-makers.
The promissory note provides that the loan is payable in daily equal installments of
P2,000 with interest as 26.002% per annum.
In case of default in the payment of any installment, the entire balance of the
obligation shall become immediately due and demandable, and subject to
liquidated penalty charge equivalent to 2% of the principal
To provide additional security, ASI and Melbarose executed a Deed of Mortgage in favor
of GDC acceding that: should the Mortgagors fail to comply with any of the terms of
the promissory note and this mortgage contract, the Mortgagee shall
automatically have the absolute right without need of prior notice or demand to
forthwith judicially or extrajudicially forclose this mortgage xxx
The properties subject of the mortgage are itemized in an inventory attached to the
deed:
o List A- all the merchandise and stocks in trade found in the commercial
establishment owned by ASI and Melbarose, valued at P100,000
o List B- all the furniture, fixtures, appliances, equipment and other personal
property found in said business establishment, P3,500
o List C- one Toyota Corona, valued at P40,000; one Totoya Corolla, P35,000
GD demanded that Melbarose pay the unpaid account of P179,000, or surrender the
mortgaged chattels within 5 days from notice
No payment was made, RTC filed a complaint for Replevin and/or Sum of Money
with Damages against ASI, Melbarose, Manipon, Florante Edrino and John Doe.
o Replevin- ordering the seizure of the above described chattels or personal
propert with all accessories and directing their transfer to Plaintiff for the
purposes of foreclosure and or transfer to satisfy the obligation in favor of the
plaintiff
RTC issued a Writ of Replivin, by virtue thereof, the Sheriff seized and delivered to the
GDC one unit of Toyota Corona and two appliances
Dec. 2, 1991, GDC filed an Amended Complaint to include in its application for replevin
the items under List A. RTC issued an Alias Writ of Replevin, items seized and delivered
to GDC
Second Writ of Replevin was also issued over the Toyota Corolla, but records do not
indicate that the Sheriff made a return on the writ
ASI and Melbarose filed their Answer with Counterclaim, contending that their loan
obligation was only P200,000, and after deducting the P18,000 which amount was
retained by GDC as advance payment, and P29,000 representing payments made from
June 4, 1991 to July 8, 1991, their unpaid obligation was only P171,000.
o That they repeatedly tendered payment, but GDC rejected their efforts for
no valid reason
o That the unreasonable refusal to accept such payment relieved them of
their loan obligation
 Manipon led a separate Answer in which she did not deny the authenticity of her
signature on the Promissory Note, but argued that she did not knowingly or voluntarily
sign the instrument as a co-maker, for at that time she was under the impression that the
instrument she was signing was her own loan application with GDC
GDC disclosed that after it obtained possession of the properties subject of the writs of
replevin, it caused the auction sale of some of them and realized proceeds amounting to
P78,750.00 (No certificate of sale, but as testified by respondents witness, Leonila
Buenviaje)
GDC presented a Statement of Account, which indicated that the total outstanding
balance of the loan obligation of ASI and Melbarose was reduced to P191,111.82 after
the proceeds of the auction sale conducted on June 19, 1992 in the amount of
P78,750.00 was deducted from the earlier balance of P266,126.17
RTC, in favor of GDC
ASI, Sasot and Manipon appealed to CA, DENIED; Motion for Recon, denied
SC: Petitioners contend that they were relieved of their obligation to pay GDC when they
made several attempts to tender payment but respondent refused to accept them
without any valid reason.
July 3, 1991- first tender of payment, Sasot sent GDC a PCIB check postdated Oct 31,
1991 of P171,000. Check rejected because the amount was insufficient for as July 4,
1991, the balance of the principal loand was P175,000, not P171,000, and its maturity
was Sept. 13, not Oct. 31
Oct. 15, 1997- tendered payment of P171,000 in cash, respondent refused due to
insufficiency. Statement of Account was sent to petitioner indicating that the total
balance due was P228,071.61
On October 29, 1991, petitioners tendered cash payment of P174,986.96, 338 8 but
respondent still refused to accept it for insufficiency of the amount.
ISSUE: WHETHER OR NOT TENDER OF PAYMENT AND RESPONDENTS REFUSAL
DISCHARGED PETITIONERS FROM THEIR OBLIGATION
HELD: NO

Tender of payment, without more, produces no effect; rather, tender of payment

must be followed by a valid consignation in order to produce the effect of
payment and extinguish an obligation
Mere preparatory act to consignation. It is the manifestation of a desire by the debtor to
comply with or pay an obligation. If refused without just cause, the tender of payment will
discharge the debtor of the obligation to pay but only after a valid consignation of the
sum due shall have been made with the proper court
Consignation is the deposit of the proper amount with a judicial authority, before
whom the debtor must establish compliance with the following mandatory
requirements:
(1) there was a debt due;
(2) the consignation of the obligation had been made because the creditor to whom
tender of payment was made refused to accept it, or because he was absent or
incapacitated, or because several persons claim to be entitled to receive the amount
due, or because the title to the obligation has been lost;
 (3) previous notice of the consignation had been given to the person interested in the
performance of the obligation;
(4) the amount due was placed at the disposal of the court; and
(5) after the consignation had been made, the person interested was notified thereof.
Failure to prove any of these requirements is enough ground to render a consignation
ineffective.
Petitioners did not allege or prove that after their tender of payment was refused
by respondents, they attempted or pursued consignation of the payment with the
proper court.
Their tender of payment not having been followed by a valid consignation, it produced no
effect whatsoever, least of all the extinguishment of the loan obligation.
Therefore, the first issue of the validity or invalidity of their tender of payment is
completely moot and academic, for either way the discussion will go, it will lead to
no other conclusion but that, without an accompanying valid consignation, the
tender of payment did not result in the payment and extinguishment of the loan
obligation. The Court cannot take cognizance of such a purely hypothetical issue.
Disclaimer: following issues, irrelevant to Oblicon pero ilagay at idiscuss ko na rin briefly kahit di
ko naiintindihan HAHAHHHA WAG NIYO NA ITO BASAHIN
FIRST ISSUE: Whether the parol evidence rule applies on the promissory note in question
when the co-makers thereon are total strangers to another
HELD: Lack of basis. Manipon did not join in the petition.

The finding of the RTC, as affirmed by the CA, that she was a co-maker of Promissory
Note and a real party-in-interest is already final and conclusive. Petitioners cannot now
question this finding by raising the defense that Manipon signed the promissory note
without knowledge of the nature of her liability under the instrument.
Such defense is personal to Manipon and cannot be invoked by petitioners, unless it is
shown that their interests are so interwoven with and dependent on Manipon's as to be
inseparable.
SECOND ISSUE: Was there a legal basis for RTC to grant respondent the relief of collecting
the amount of P269,611.82 plus legal interest until full amount is paid, when respondents
already covered P78,750

As emphasized at the outset, the reliefs respondent prayed for in its Complaint and
Amended Complaint are in the alternative: delivery of the mortgaged properties
preparatory to foreclosure or payment of the unpaid loan
NO, by causing the auction sale of the mortgaged properties, respondent effectively
adopted and pursued the remedy of extra-judicial foreclosure, using the writ of replevin
as a tool to get hold of the mortgaged properties. One effect of respondent's election of
the remedy of extra-judicial foreclosure is its waiver of the remedy of collection of the
unpaid loan
However, another effect of its election of the remedy of extra-judicial foreclosure is that
whatever deciency remains after applying the proceeds of the auction sale to the total
loan obligation may still be recovered by respondent
THIRD ISSUE, DI PA RIN RELEVANT: Whether respondent instituted the proper action for
deficiency amount or raised or its claim at the pre-trial

The Complaint and Amended Complaint reveals that respondent did not allege
any deciency account. Nor did it raise the matter in its PreTrial Brief. This is only to
be expected because the auction sale of the properties was apparently conducted long
after it led its Complaint/Amended Complaint and Pre-trial Brief
However, the Court notes that evidence on the deficiency amount was duly presented by
respondent and examined by petitioners (thru the testimonies and documentary
evidences presented in court)
The properties of petitioners which were seized by virtue of the Writs of Replevin were
extra-judicially foreclosed and sold at public auction by respondent in the exercise of its
absolute right under the contract entered into by the parties, without need of prior notice
or demand to forthwith judicially or extra-judicially foreclose this mortgage and proceed
against all or any of the mortgaged rights, interests and properties for the full satisfaction
of the mortgagors' entire obligation to the mortgagee.
Under the Deed of Mortgage, it is provided that in case of default, petitioners shall
be liable for liquidated collection charge in the amount equivalent to 25% of said
outstanding obligation.